Do technology standards make sense for airlines' attempts to differentiate?

GDS executives are calling for the development of technical standards for the booking and processing of airlines' unbundled fares, ancillary revenue and other sales innovations. Sabre chief Sam Gilliland raised the issue at November's PhoCusWright conference.

But other industry players are saying, "Not so fast." "Standards are good, but let's all keep in mind that this is about differentiation," Suzanne Rubin, American Airlines' managing director of merchandising and distribution strategy and president of AAVacations, said. "We don't want something that puts us right back into the same box of commodity product."

Gilliland has warned that the merchandising trend could become "e-ticketing 2.0."

Electronic tickets made their debut in 1995. Many passengers resisted using them because if a flight was canceled, they had to stand in line to have a paper ticket issued and endorsed to another carrier.

The airlines quickly realized that e-ticket adoption would increase if that hurdle were removed, yet the first interline e-ticket agreement was not signed until 2002. It covered two airlines.

Early adoption of standards would have eased the transition to universal electronic ticketing, but some industry participants say merchandising is a different animal.

Timothy O'Neil-Dunne, managing partner of T2Impact, a business accelerator for travel distribution, said, "Airlines are saying that this is not a standardized service and should not be covered by standard rules that somebody mandates."

Consultant Maurice Coleman concurred, noting that the e-ticket itself was not a competitive tool. "No airline ever said, 'We're going to get more passengers because we have a better e-ticket,'" he said.

The issue came to a head last spring and summer, when airlines faced unprecedented fuel prices and rushed to find ways to boost revenue, such as baggage fees, even before they could figure out how to allow passengers to pay them online or through a GDS.

O'Neil-Dunne said there simply wasn't time to focus on such details. "Airlines were manning the fire hoses, trying to figure out how to ameliorate the outgoings by creating some incomings," he said. Developing standards isn't practical when circumstances call for immediate action, he said.

Meanwhile, the realities of staff cutbacks on both sides make more individually focused development burdensome for GDSs, he said. When GDSs had "an army of American Airlines specialists and Delta specialists, it was easy to accommodate differences," O'Neil-Dunne said. "Now they don't have armies to do these things, so they are beginning to push back on having to do the heavy lifting." At the same time, there are no corresponding armies at the airlines that can work with GDSs on such projects, he said.

When times were not quite so lean, "people would go to industry meetings to discuss these things," he said, and consensus often took years to emerge. "When you take all these forces at play --the practicality, the lack of people on both sides of the fence, the turgid process of getting industry concurrence --nobody's got time to deal with it. "If GDSs expect airlines to dance to their tune, that's just not going to happen," he added. "I empathize with their situation, but that's life."

Coleman, who was marketing manager at Aer Lingus' when it refashioned itself as a low-cost carrier, pointed out that the way in which GDS-airline relationships have evolved also makes the development of merchandising standards difficult.

The GDSs most likely are dealing with the distribution people at the airlines, he said, but it is the marketing people who are driving the move to unbundling and ancillary revenues.

"Distribution people don't necessarily know what's coming down from the marketing people," Coleman said. "Marketing is a very different mindset," he said. "Distribution has remained a very technical-driven skills base, while marketing is about people being creative. How do you standardize creativity?"

Coleman acknowledged that there is room for some basic standards for merchandising and that some efforts are under way.

American's Rubin noted that "ATPCO has been very active in this space in trying to come up with standardized ways to structure the terms and features of merchandising and to facilitate transmission of that data."

David Doctor, Amadeus' director of airline distribution, said the company has been working closely with some airline systems as it develops its merchandising solutions, "but as we expand to systemwide delivery, we need to go to more standardization." He said both Amadeus and Sabre are working with ATPCO to develop standardized formats.

"It is very important," he said. Otherwise, "our costs would go up as well."

Coleman said GDSs are in a tough position when it comes to the cost of providing new capabilities. Airlines' desire to unbundle fares comes at a time when GDSs also are unbundling their services, charging separately for features that go beyond basic transactions.

But they are unsure how to price customized solutions for merchandising, unbundling and ancillary revenues, he said, so they are leading the charge on standards.

"GDSs can only operate on a planned basis," he said. "They can't deliver capability for a new pricing model at the drop of a hat. They'll say, 'Give us a 24-month timeframe,' but airlines don't know what they are going to be in two years."

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